Sunday, 25 October 2020

Managing Higher Education

Updated: February 27, 2010 1:31 pm

True to its image in other spheres, India is a country of great contardictions as far as higher education is concerned. It has the largest number of higher educations in the world and it is the third largest in the world in student numbers, after China and the United States. But its overall quality of higher education is far behind the quality available in comparabe countries. Laments Prof Amitabh Mattoo, a member of the National Knowledge Commission and of the Standing Committee of the Association of Indian Universities, “ Let us face it. The higher education sector today presents a dismal picture. Not even one Indian university is included in the top twenty Asian universities in the rankings of Asian Universities, recently released by Quacquarelli Symonds (QS). In the QS list of top 200 Asian universities, there are only eleven Indian institutions. And, outside the IITs, only four Indian universities find a place (Delhi, Pune, Calcutta and Mumbai)”. Till recently Vice Chancellor of Jammu University, Prof Mattoo then asks: Can India ever claim to be a real great power if its higher education sector is in such poor shape?”

            Even quantitatively speaking, the present situation needs a lot of improvement. The enrolment level in higher education in India ( per cent of relevant age group enrolled in higher education) is estimated at 12 per cent. About 11 million are enrolled in higher education.

            This number is expected to grow at over 5 per cent annually (combination of higher enrolment levels and growth in population). However, in comparison, enrolments levels are 25 per cent in the US and 16 per cent in China, while the developed world’s average is around 22 per cent. Obviously, India needs more quality higher educational institutes, particularly when the population in the 15-24 years age group is expected to be about 235 million by 2010, around 19 per cent of the total population. If these trends continue, and the new supply of seats for higher education builds up at current pace, then, as Raghav Gupta, President of leading management consultant firm Technopak, estimates, India would see a short fall of 5 million graduate seats by 2015 and 7 million by 2020. “This is a significant statistic, given the already low selection ratios for top institutes in the country”, he argues.

            Secondly, as things stand now, most of the Indian students enrolled in higher education are in the popular streams of Humanities and Arts. Of the 11 million students enrolled in higher education, the most popular fields/streams are Humanities and Arts, followed by Social Science, Business and Law. The first two streams together attract nearly two thirds of the students enrolled in higher education, while engineering attracts only 7 per cent of students. Conventional disciplines of humanities and Arts are no doubt important, but as it strives to compete fiercely in a globalised economy, India requires highly trained professionals from its higher institutes of learning (see Table A).

            So far, India’s large educated population base and its reservoir of at least moderately well-trained university graduates have permitted the country to move ahead. But the competition is fierce. China in particular is heavily investing in improving its best universities with the aim of making a small group of them world class in the coming decade, and making a larger number internationally competitive research universities. Other Asian countries are also upgrading higher education with the aim of building world class-universities. Taiwan, which is a major designer and producer of IT hardware, is considering merging several of its top technological universities to create an “Asian MIT.”

            In fact, a latest Technopak survey, authored by Raghav Gupta and Luv Jasuja, reveals that there is clearly a mismatch in the faculty wise enrolment in India and future industry requirements. “ The ten likely high growth industries / sectors in India are telecommunication, IT-ITES, healthcare & pharmaceuticals, banking & finance, engineering goods, real estate & construction, retail & consumer goods, tourism & hospitality, automotive and aviation & airlines. The future employment demand for these industries is estimated at 5.0 million and 6.5 million by 2015 and 2020 respectively. These industries will require a much higher numbers of engineering, management, business, finance and service industry professionals. Therefore, there is a need for re-orienting the stream wise enrolment in the coming years. Also, the number of colleges and institutes need to be increased to cater to increased enrolment levels”.

Corrective course

The present state of higher education in India needs transformation both in quality and quantity. It needs expansion and excellence. And fortunately, there is a growing consensus in the country on these two aspects. As Sam Petodra, the Chairman of the National Knowledge Commission, says, “We are on the right course to reach our goal of making India a developed country”, with the present government in India taking all the possible corrective measures and soliciting the presence of the private sector in the field of higher education (see Box). The mantra   here is that the government alone, despite its increasing allocation of resources for the higher education (though as 0.7 per cent share of the overall GDP it is unlikely to grow further substantially), cannot alone meet the rising demands of higher education in India. The private sector has an equally high role to play.


            Currently, there are more than 16,000 registered higher education colleges affiliated to 543 universities and more than 7,700 institutions providing diploma / certificate courses. In addition, there are hundreds if not thousands of institutions that are not registered or recognised. Apart from the factors such as higher enrolment ratio levels, growth in population and increased government expenditure, these figures are bound to grow because of the following:

            First, the growth of the service sector in India’s GDP (from 42.7 per cent in FY91 to 55.6 per cent in FY08) will increasingly demand more skilled manpower in sectors such as banking, tourism, insurance, hospitality, hospitals, IT and engineering, automotives and airlines. The future employment demand for these industries is estimated at 5.0 million and 6.5 million by 2015 and 2020 respectively. These industries will require a much higher numbers of engineering, management, business, finance and service industry professionals.

            Secondly, even at present quality educational centres are not being able to accommodate the increasing demands for admission. The vast majority of students appearing for IIT and IIM entrance examinations are rejected due to capacity constraints and a number of these go overseas to study. As per an ASSOCHAM report, Indians spend more than US$ 4.0 billion per year in sending their children overseas for education. Obviously, most of these foreign-bound students will stay back in the country if there are adequate numbers of quality institutes in the country.

            Thirdly, this is a corollary of the above, with globalisation of skills requirements increasing, India, like the United States, Britain and Australia, can easily become a destination for higher education of the students from the develioping world, particularly Asia and Africa. Cross-border education has become an important means of globalizing higher education, as complementary to the globalisation of economic production. Countries are interested in promoting their profiles internationally and institutions are keen to engage in cross-border education since the income earned from this continues to be attractive. For example, in 2005, four countries (Australia, New Zealand, the UK and the USA) received more than US$25 billion in cross-border education. Institutions are interested in cross-border education since it is a new source of income, especially in the context of declining funding support from governments. It is estimated that the income from students abroad accounts for more than one-third of the institution’s total income in some Australian universities. India can take a leaf out of this trend.

            Fourthly, with the number of urbanised middle class families rising in the country, household expenditure in higher education is bound to grow in the years to come. For instance, in FY07, approximately 7 per cent of urban India’s per capita monthly household expenditure was spent on education. Besides, now-a-days there is easy availability of Bank loans for higher studies. The country’s nationalised banks alone disbursed education loans of approximately INR200 billion to about 1.25 million students in FY’08. The private sector banks had a portfolio of approximately INR5 billion in the same period. In FY’08 The portfolio of education loans of banks witnessed a growth of 40 per cent and the number of students taking loans increased by 33 per cent. The outstanding loan amount is expected to rise by another 40 per cent in FY’09. This trend is all set to gain further momentum.


Projected growth

“India’s education and training sector offers an estimated US$40 billion market, with a potential 16 per cent five-year CAGR,” says a report by CLSA Asia-Pacific Markets. About 50 per cent of this sum constitutes the higher education segment. If one adds vocational education segment to higher education, it becomes a US$30 billion market. According to another report – by IDFC-SSKI – India’s current spending on education is at 5 per cent of average household income with a CAGR of 8.6 per cent versus consumption growth of 3.2 per cent over 1995-2005. “With an inefficient public education system, a growing young population, a bourgeoning middle class (with the intent and ability to spend) and price discovery it has seen over the past decade, we expect 14 per cent CAGR in private spends on education ($80 billion by 2012),” the IDFC report forecasts. It also takes into account the $13 billion being spent annually by Indians on higher education overseas to highlight the “pay power of the education-hungry Indians”. The CLSA report also establishes the growing preference for private sector institutions. In higher education – 77 per cent of the 18,000 institutes are already privately owned.

            The Technopak study says that market for Higher Education is projected to grow almost three times in the next 10 years; and market size for Skill Development is projected to grow almost ten times, albeit over a smaller base (see Table B).

            The EDGE report says that the higher education market is estimated to grow up to as high as US$80 billion by 2012. Of this, the private sector has already a leading presence in few selected disciplines such as engineering, medical and management. The market size of private engineering colleges is USD 5.4 billion (approximately 84 per cent of the USD 6.5 billion private colleges market), followed by

            management with USD 680 million (approximately 10 per cent) and medical with USD 350 million (approximately 6 per cent). In the professional courses segment, private management colleges are expected to grow by 100 per cent from 300 to 600 by 2012. Number of engineering colleges is expected to grow by 67 per cent to about 2,000 and medical colleges to grow by 43 per cent to around 200 by the same period.

As it is, many leading private players in higher education are expanding their activities. And some new players (primarily corporate) have expressed interest to enter the education space. Some recent examples of announcements include:

            Indian School of Business (ISB) has announced plans for a second campus near Mohali.

            Amity University and Rai group are expanding through adding new courses and new campuses.

            Manipal University is expanding through new courses and campuses, in India and overseas.

            Proposed Vedanta University by Mr. Anil Agarwal, Chairman of Vedanta Resources, spread across 6,000 acres with estimated investment of more than US$ 3.0 billion in Orissa.

            Proposed multi-disciplinary University by HCL’s Founder and Chairman, Mr. Shiv Nadar, spread across 300 acres in NOIDA.

KIIT University, Bhubaneswar, Orissa, has added many new courses and also new off-campuses in Bengaluru and Greater Noida.


As Profit-non-profit angle

With private sector becoming a major player in the field of higher education, the question of profitability or lack of it arises. As it is, here in India, participation of private sector in educational activities has been traditionally seen as a public service and hence non-profits have been the principle. But there is now a school of thought that argues that like any other business activity, education sector should be profitable for the private investors. And it is thought that Private professional Educational Institutions Bill (2005) and Foreign Educational Institutional Bill (2007) that the Parliament eventually will decide on should allow profits for private players under acceptable conditions. Says Vineet Gupta, Managing Director of the Jamboree Education, “ If any promoter or investor gives you world class education, he is entitled to profits. There is nothing wrong in it. I think it is a matter of time for the change in Indian mindset”.

            At a time when because of the global meltdown investors and promoters worldwide are turning towards the education sector, a sector that is least likely to be affected by cycles of recession, the country needs a debate on the issue of profitability. Siddharth Dhondiyal of “ India Value Fund” (which manages private equity funds) suggests a way out. “One solution is to

(i)         To devise a simple and unambiguous regulatory framework through legislation

(ii)        The regulatory framework should focus on laying down relevant standards of quality and a transparent mechanism for monitoring and rating performance of educational institutions against these standards.

(iii)       Set well defined guidelines for private sector participation in the industry

(iv)       An education tax / cess on surpluses generated by the for-profit sector to fund subsidies on tuition, loans etc for the economically disadvantaged meritorious students to meet social welfare objectives” he argues.


Governance and Management

Other reforms that could provide strength to the higher education are in the areas of management. As Prof. Mahendra Lama, vice-chancellor of the newly created Central University of Sikkim, points out (see Box), complex and multiple regulatory bodies of the higher education in the country (UGC, AICTE and other central and state governments’ parameters) and the consequent lack of clarity with respect to admissions, curriculum, fee levels, infrastructure requirements and salaries   take away the “autonomy” of the institutes, which is vital to India producing world class centres of education. Therefore, the Knowledge Commission has recommended for the establishment of a single “super regulatory body” in the country.   As Nandan Nilekani of the Infosys fame, who is chairman of the Unique Identification Authority of India and a member of the Knowledge Commission, argues, a super regulator “would bring about uniform standards and a transparent system of regulation, recognition and quality control. This would also make way for national level assessment tests and scores that would carry weight in any university anywhere in India”.


            It is becoming increasingly obvious that a robust operational management framework is a key enabler in scaling up higher educational institutes. As the EDGE report says, growth challenges in the sector happen to be limited visibility of operating metrics, dilution of controls and higher risk of leakages, inability to provide desired customer experience, lack of management bandwidth and inability to maintain consistent quality. And in order to meet these challenges it recommends an integrated technology solution, a holistic Business Performance Management System, creation of institutions which meet international quality benchmarks and improvement in governance, accountability and transparency.

            For becoming world class, higher educational institutes, need the implementation of what is said a Business Performance Management (BPM) system that focuses on performance measurement, planning, forecasting, budgeting and business performance. This will grow values, quality consciousness, and enhance reputation (see Table C).

Finding Professional Managers

Given the nature of management challenges, it is clear that the higher educational institutes require professional managers. But that is not the case at the moment. Largely academicians have been given senior managerial roles, and of late there has been a trend of co-opting the retired military officials into the administration. Says industrialist Vinay Rai who has ventured into higher education a big way, “ we impart in=house training to meet the shortage of professional managers”. Vineet Gupta of Jamboree Education is also of the same opinion. “We need not exactly go the Western way of managing and running our educational institutes. India has always been a great country of entrepreneurs. We entrepreneurs will have our own way of finding talent among our staff and train them to excel and deliver”.

            However, The Yashpal Committee, which recently submitted its recommendations to the Government of India on Higher education, has recommended separation of academic administration and overall management in Universities and development of ‘education management’ as a separate specialised field. Bharat Gulia of Earnst and Young thinks that India’s higher education segment would need at least 200,000 trained professionals (see box) As it is, there are many venture capitalists and consulting agencies in India which are prepared not only to finance setting up of quality educational institutions but also provide them competent management teams. It may be recalled how McKinsey supported a unique project to establish the world famous Indian School of Business in 2001. The company played key role in taking the idea from conception to reality. Rajat Gupta, the then Managing Director of McKinsey, led the project team in the school’s conceptualisation, financial support and international collaborations. What is more, Pramath Raj Sinha, who was at the time a partner at McKinsey, took a year-long sabbatical in 2001 to become the Founding Dean of the school.

            And there are others like Ernst and Young, Technopak, Helion Venture Partners, India Equity Partners, India Value Fund, Kaizen Education Fund, Kotecha Capital Services, NYLIM Jacob Ballas India Fund, Sequoia Capital, Almondz Global Securities, Ambit Corporate Finance, BMR Advisors, Enarr Capital, Fortress Financial Services, KPMG India, Religare Capital Markets Limited, Tower Capital Advisors and Veda Corporate Advisors who are keen on educational investments and management.

            There cannot be more exciting challenges and opportunities that beckon India’s higher education sector today, indeed.

By Prakash Nanda

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